State Collecting Less Gas Revenue Despite Price Increases

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Aired 4/20/11

If gas prices are increasing, why is the state collecting less in gas-related taxes nowadays? We speak to Business Reporter Erik Anderson about what's driving up gas prices, and how a recent change to the gas tax structure is impacting state revenue.

If gas prices are increasing, why is the state collecting less in gas-related taxes nowadays? We speak to Business Reporter Erik Anderson about what's driving up gas prices, and how a recent change to the gas tax structure is impacting state revenue.

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This is a rush transcript created by a contractor for KPBS to improve accessibility for the deaf and hard-of-hearing. Please refer to the media file as the formal record of this interview. Opinions expressed by guests during interviews reflect the guest’s individual views and do not necessarily represent those of KPBS staff, members or its sponsors.

ST. JOHN: You're listening to These Days on KPBS, I'm Alyson St. John in for Maureen Cavanaugh. Do you notice your heart sinking a little every time you drive into a gast station these days? The price seems to climb a little higher every visit. We know the cost of gas is affected by the price of oil, and that what we're paying goes towards oil company profits, but what else affects the price of oil, and where else does the money go? Here to shed a little height on what's behind those numbers, rowing over rapidly as we fill up the tank, is our business reporter, Eric Anderson. Good morning, Eric.

ANDERSON: Good morning, Allison.

ST. JOHN: So what is the average price of gas in San Diego right now, approximately?

ANDERSON: Well, right now, if you go to fuel tracker.com, which is a website put together by the utility Consumer Action Network, they're putting the average price right around $4.20 a gallop. And if you're looking for some perspective, go back about two months, beginning of the year, tail end of January, you were probably only paying about $3.20 a gallon. So it's up almost a dollar a gallon and still going up even as we speak.

ST. JOHN: What kind of spread there? What's the difference between the cheapest and the most expensive gas? Is it worth shopping around?

ANDERSON: Absolutely it's worth shopping around. There's quite a bit of spread. You can pay as much as a $4.50 a gallon depending on what gas station you go to, the cheapest you're likely to find is somewhere in the neighborhood of about $4.05 a gallon. And you're asking yourself, well, what gas station should I go to, how do I find these prices? Generally what you'll find is, the gas stations that are in the more high traffic areas usually carry the higher price tags with them. So look for a little out of the way or perhaps an independent gas station to find that better price.

ST. JOHN: Does it make a difference how far away from the freeway a gas station is?

ANDERSON: Not specifically, but generally. In a general sense, yeah. The farther away from a freeway you are the easier it is to find low priced gas. There are some smart phone applications out there, gasbuddy.com, you can use that to help you find the lower gas prices, but again, shopping around can save you as much as $0.40 a gallon.

ST. JOHN: How much higher would it have to go to break a record?

ANDERSON: Well, the record, not that far away. We're at 4.20 now, the record price was set bak in the summer of 2008, and it piqued at $4.63 a gallon. So we're only $0.43 a gallon away. In fact, this is only the second time in history that we've paid more than $4 a gallon for a gallon of gas. So we're very close to where the record is, and as I said earlier, the gas price does continue to go up.

ST. JOHN: So give us an idea of what is behind this recent increase in gas prices.

ANDERSON: It's very much some of the same things we were talking about a couple of months ago. Some of the international turmoil that's going on. It started in Egypt, it carried over to Libya, some of the other middle eastern countries, concerns about the international supply of oil have driven up the cost of oil on the futures market. When the cost of oil goes up, it's more expensive to distill gasoline from oil and diesel fuel from oil, so the refineries increase their charges and those charges of course are passed through to the dealers and passed through to us. The curious thing is, in the past week or so, the international price of oil has actually slopped a bit, because there appears to be some stability in the Middle East. But retail prices have continued to go up.

ST. JOHN: So are we given any reasons for that?

ANDERSON: It's a difficult thing. Experts say there are a lot of things that play here but it's concern about the supply, I think, is the big thing at this point.

ST. JOHN: So as the oil prices go up, gas prices go up as well, prices come down, they continue to go up of there's no logical connection there?

ANDERSON: It's not quite as stark as that. There are connections. If oil was to drop to, say, $35 a barrel, which it was just two years ago, I think you'd see gas prices where they were a couple of years ago. Diesel was yesterday a couple dollars a gallon. Of it's now almost $5 a gallon now in parts of California. So yeah, I think there is a correlation between the price of oil on the international market. But it's not a strict, if the price rises $2 a barrel, we're gonna see a five cent increase in fuel prices of so there's some variation there, if it drops a bit, we're gonna see lower prices, yes. But that's just not happening at this point.

ST. JOHN: So does San Diego have some of the highest prices in the state or in the.

ANDERSON: That's up there. But there's not a lot of -- there's not a lot of diversity and not a lot of range in the state. The bay area, for example, I think has the highest price for a gallon of gas, average price for a gallon of gas right now. San Diego has during the course of this year has been in that position, Los Angeles has been in that position. So that kind of varies a little bit. I think the thing to remember is that as a state, the State of California now one of only five states in the country that have an average price that's over $4 a gallon. And Illinois is another high price state, there are a couple of states on the east coast that are dealing with plus $4 a gallon on prices. But I think if you see the oil prices stay where they are right now, a lot more states are gonna be joining that club, and California will continue to see liar prices toward memorial day.

ST. JOHN: So what are the economists saying about the effects these high gas prices are having on San Diego's economy?

ANDERSON: Well, economists have a difference of opinion. Different economist ares think different things. I spoke to Allen gen about this who's an economist at university of San Diego, and he says that he figures that here locally, if the gas of gas raises $0.10 a gallon, that's about $7 million worth of economic activity that's going towards the price of gas that would have otherwise been spent on restaurants or clothing are or other items, and you put that in context, we're a dollar a gallon higher than we were a couple months ago, so that's $70 million a month that isn't going toward these other economic activities but is going toward fuels. So there is a very real impact, and some economists are concerned that the long term impact is, that the high prices, if they sustain themselves over the course of the summer, will have an impact on the nations' and the state's and region's ability to bounce back from the economic tumult that we've just experienced.

ST. JOHN: So let's talk a little bit about where the money we're paying goes. Dispute the higher gas prices, the State of California is collecting less gas receive new you've discovered. Why is that?

ANDERSON: Well, there's no silver lining this time around. Think about to '08, when the last time gas prices burst through that $4 a gallon barrier. Well, in '08, what the State of California was doing then was collecting two taxes on gasoline of they were collecting an excise tax about $0.18 for every gallon of gasoline sold in the state, and a sales tax. So six percent of the entire sale of what you pay at the pump was going to the State of California's general fund. What they decided to do last year, during the budget negotiations was to kind of fix the flow of tax money. They wanted to help insure that tax money from gasoline was set aside for a construction project. So they shifted the sales tax on to the excise tax. The excise tax is now almost 36 cents a gallon. And the only sales tax charged on a gallon of gas is about two percent or so that goes to local governments, the state no longer gets that sales tax revenue. And you're asking yourself, what does that mean in the over all big picture? Are, the last time the prices ran up really big, back in '08, the state made almost a billion dollars more in revenue. And the state's probably not gonna make that money this time around. In fact, they could make less tax revenue this time around during this run up in gas prices because they're charging a per gallon fee, and if consumption of gasoline drops, there'll be fewer gallons that are taxed, so they could actually see a small drop in the over all revenue picture when it comes to gas taxes. No silver lining this time around.

ST. JOHN: Well, in view of the current budget situation, that's the rationale behind having made that exchange.

ANDERSON: Well, I think what they wanted to do was kind of secure some funding for construction projects, things related to gasoline, roads, bridges, etc, and that was one of the justifications for doing that, and they thought at the time that it would be a revenue neutral swap. A gas tax swap. They'll just take this pile of tax money, move it over here, in the end it'll be the same. What they didn't account for was the rapid increase in the price of gas. And they only set the excise tax in February, so they have to wait till next February to make up for that again, and who knows where the price of gas is gonna be then?

ST. JOHN: So we won't get the satisfaction when we fill up our tanks feeling like we're help think this state budget crisis.

ANDERSON: No, that it is not gonna happen either.

ST. JOHN: Is there any way to tell how this is gonna affect the state budget.

ANDERSON: It's a difficult thing, but a billion dollars could make a difference in what the state budget tries to do with its budget deficit. I think they're wrestling with a 17 billion dollar deficit somewhere in that neighborhood. They're trying to find a way to close that budget gap, and having that extra revenue could have made a difference for some programs we know pretty much to that that revenue is not gonna be coming in. At least not from gasoline taxes.

ST. JOHN: This is a pretty recent change, but has there been any discussion about reversing it since gas prices are so high now?

ANDERSON: There has been no talk that I've heard, and I read a lot on this subject and try to get an idea of where the picture is. There has been no discussion of that yet. What it means in terms of how they decide to tax gasoline down the road, interesting could probably change over time. But at least not a discussion yet. I don't think that the state -- I think that the state enjoyed are the extra revenue the last time that it happened, but they're not looking to over burden the consumer either. So they're not looking to try to make up -- there's no discussion right now of them trying to make up the falling revenues by increasing the taxes and putting that burden onto the consumers at a time that's economically difficult for even.

ST. JOHN: Yes, the price of gas is already high enough. So finally, do we have any idea about how embassy prices could go this spring and summer? Because they traditionally do rise as the summer comes, right?

ANDERSON: You know, it used to be thought that gas prices tend to pique in the middle of the summer. That's kind of when we see the pique, when the record gas price was set in '08, it piqued in August, early August. So that's kind of the conventional wisdom. What's interesting and the reason I'm kind of hesitating a bit, is what's interesting with that is in the last year, almost the last two years, those traditional seasonal patterns haven't really showed themselves. Generally, if you look back at history, what happened with gas prices is you start at a low price in January, it rises gradually through the middle of the summer, and then becomes to decline through the course of the year and hits a low point again in the beginning of the year. In the last year, the last January to January cycle what we saw was a gas price that kind of hovered in this $0.15 change, it never really went up that much, it never really went down that much for the entire year. A little bit surprising. Unusual. Some of the volatility had gone out. And then this year, we started at a place where the gas price was very high in January, about 320 or so a gallon. And it just sort of took off in the late winter because of what happened in the middle east. And it hasn't really kind of turned around yet. What I've read about the subject from many of the analysts, and of course there are different opinions on all of these subjects, but the sense I get is that we may see a high water mark around memorial day of this year. Experts figure that's kind of where the wave will crest, and then we'll see if the situation in the Middle East stabilizes enough. We might see that price come back down a little bit.

ST. JOHN: And if you were a betting man, could you estimate where it might pique?

ANDERSON: If I was a betting man, I probably would be able to make a lot of money on oil prices. All I can really do is look at kind of where they have gone in the past and where they might go in the future. But I'd say it's probably safe to say that prices will ease up till memorial day, then we'll kind of reassess, see where the international situation is, and if that's not continuing to put pressure on price accident they'll likely fall.

ST. JOHN: Well, you've been keeping your eye on oil prices for a long time, Eric. So thanks very much for coming in and shedding a bit of light.